A business or merchant may want to accept credit cards or debit cards as payment for goods and services in addition to accepting cash payments. However, acceptance of a credit or debit card as payment requires that the merchant verify that the credit or debit card is valid and that a charge submitted by the merchant to the issuer of the credit or debit card will be accepted by the issuing organization.
The validity of a cash payment is easily verified by the merchant's visual examination of the cash which is offered for payment. Counterfeiting of cash has become more difficult with the inclusion of special embedded threads in currency and other methods of protection against counterfeiting.
A credit or debit card payment requires that the merchant undertake steps to obtain an authorization of a charge on the debit or credit card. The merchant can thereby be assured that when the merchant submits the charge to the organization which issued the credit or debit card that the charge will not be rejected, resulting in a non-payment to the merchant.
Early charge authorization systems required the merchant to place a phone call to an authorization center, which asked the merchant for the number of the credit card, the identification number for the merchant, the amount of the transaction and other such information. The authorization center then used a computer system to verify that the charge was authorized and then provided the merchant with an identifying authorization number. The merchant then submitted the charge to the credit card issuing organization, usually through the merchant's banking institution, on a paper transaction slip. The authorization number was included, along with written information on the amount of the transaction, the credit card number and the merchant identification number on this paper transaction slip. Usually the customer was also provided with a copy of the transaction slip which the merchant would submit for payment.
Drawbacks of these early systems included the heavy reliance on paper transaction slips and their inherent high cost and the amount of human labor involved in the transaction authorization process. To overcome these drawbacks later systems for credit card transaction authorization have used electronic point-of-sale terminals which automatically obtain an authorization or denial of a credit card transaction.
These point-of-sale terminals typically read a magnetic stripe on the credit card to obtain the credit card number and expiration date and use a keypad for merchant entry of the amount of the charge. The point-of-sale terminal then automatically makes a connection with an authorization processor via a dialup phone line and the public switched telephone network. The point-of-sale terminal transmits information about the desired transaction to the authorization processor. The authorization processor obtains, from the credit or debit card issuing organization, an authorization or denial of the desired transaction. The authorization processor then transmits information indicative of the authorization or denial of the transaction to the point-of-sale terminal. The point-of-sale terminal then usually displays an authorization code number and also prints a receipt for the customer to sign.
In order to ensure that credit or debit card transactions are properly processed, the organizations which operate the authorization processors require validation of the software program that operates the point-of-sale terminal. This program validation is a lengthy process which can be expensive.
Automated teller machines are another type of financial transaction device which uses a dialup line and the public switched telephone system to contact an authorization processor to obtain an authorization or denial of a financial transaction.
Some merchants use a computerized cash register, in which the opening of the cash drawer is controlled by a computer which is also connected to a point-of-sale credit card authorization terminal. In some cases a magnetic card stripe reader is incorporated directly into the design of these computerized cash registers. The point-of-sale terminal incorporated within these computerized cash registers also uses a dialup phone line connected to the public switched telephone network to contact the authorization processor.
In addition to obtaining authorization to make a charge to a credit or debit card, merchants have also used these point-of-sale terminals as check verification systems. In this case the desired financial transaction is a check verification, and the point-of-sale terminal contacts an authorization processor which is used to obtain an authorization or denial of the acceptance of the customer's check.
A drawback of these types of financial transaction devices is that they require a dialup phone line connected to the public switched telephone network in order to contact the authorization processor. This requirement precludes the use of these devices in a portable fashion, unless a dialup phone line is available at each location where the financial transaction device will be used.
Merchants who would like to accept credit or debit cards but who have mobile or temporary locations, such as roadside stand vendors, pizza delivery companies, limousine or taxicab companies or other mobile vendors do not always have a dialup phone line available to them at their mobile or temporary locations. Thus the point-of-sale transaction terminals which are readily available cannot be used by these merchants.
Another drawback of some of these devices is that the communications between the point-of-sale terminal and the authorization processor are undertaken with the credit card number, cardholder name and other data in plaintext without encoding or efforts to hide this data. The signals transmitted by the point-of-sale terminal may travel dozens or hundreds of miles to the authorization processor. An electronic device which picks up signals off of the dialup phone line anywhere along the length of the transmission path may be able to obtain the cardholder name, credit card number, expiration date and other information since this data is transmitted in plaintext.
Wireless operation of a financial transaction device in a portable fashion would allow merchants who are currently not capable of accepting credit or debit cards as payment for goods or services to accept such cards. Additional benefits may be provided to merchants if the wireless connection of a financial transaction device either provided cost savings to the merchant or provided backup services in the case of a dialup phone line failure. Adding wireless capabilities to an existing financial transaction device further provides a merchant with the option of operating the financial transaction device in either a fixed or portable fashion, as determined to be most beneficial to the merchant.
What is needed is a way to operate a financial transaction device, such as a point-of-sale credit or debit card terminal, or an automated teller machine, in a wireless or portable fashion. Some wireless point-of-sale terminals have been developed. For example, U.S. Pat. No. 5,208,446 describes a wireless point-of-sale terminal. However, these systems require that existing point-of-sale credit card terminals be replaced in order to be used as wireless terminals.
Therefore, it can be appreciated that there is a significant need to operate an existing financial transaction device in a wireless or portable fashion, so that a new program validation will not be required by the organizations which operate the authorization processors. It would be further desirable to add data security capabilities to existing financial transaction devices.